Mortgage Fraud (Part 2)

Holy Fraudsters, Batman!

Tales From The Trenches™ are real life stories from homeowners and investors just like you. In my last post, Tales talked about mortgage and real estate fraud. There is just no end to fraudster’s tricks. Courtesy of a news bulletin from the Law Society of Alberta, here are some other examples of fraud. Keep your eyes wide open!

1. A Collection Request on an Unpaid Receivable

“An Alberta lawyer received a call on May 31, 2011 from an individual purporting to be from Newton, Mass., seeking a collection of $320,000 on an unpaid receivable.

He provided an email, physical address and a contact number. In checking the details, the lawyer found the company appeared to be a legitimate one with an office in Lethbridge, Alberta. The postal code was correct. The lawyer checked the physical address through Google Earth and did not locate any buildings. When the caller provided the phone number, 613-224-612, the lawyer advised him it did not have the correct number of digits. The caller then added an 8 to the end.”

COMMENT: Fraudsters are getting more sophisticated. They try to make sure your diligence gets an appropriate answer, at least at the first attempt. Do lots of diligence, follow it all through.

2. Identification Information Sought in “Nigerian Letter”

“An Alberta lawyer advised the Law Society that he, his wife and a client received similar letters over a six month period seeking proof of identity.

The letter to the Alberta lawyer was sent from an individual purporting to be a personal attorney to a client (who had a similar last name as the Alberta lawyer). He indicated that his client, along with his family, lost their lives in the Madrid train bombing and that he is seeking information to repatriate the money and property left behind. The deceased client is purported to have an account valued at ‘about USD$88.8 million dollars’ and the bank ‘has issued me a notice to provide the next of kin or have the account confiscated within the next ten official working days’.

The letter writer states he has been unsuccessful in locating the relatives ‘for over 8 years now’ and wishes to present the Alberta lawyer as the next of kin since he has the same last name as the deceased client. The Alberta lawyer was requested to send legal documents verifying his identity. No money was requested.”

COMMENT: This version of the “Nigerian Letter” is a little more sophisticated. These letters go to everyone, not just lawyers. But, really, the notion that $88 million would be payable on proof of identity is simply ridiculous. There are many versions of the “Nigerian Letter”. This is classic, ‘If it seems too good to be true, it isn’t true’.

3. Strange Real Estate Transaction Raises Red Flags

“An Alberta lawyer was recently retained to act for a buyer and seller in a residential real estate transaction, a cash deal with a purchase price of $412,500.00, and in the ensuing process, several red flags were raised.

The seller had contacted the lawyer prior to signing any deal to ask about a kind of reverse tenancy-at-will type of agreement because the buyer was apparently in a panic to get possession. When the lawyer was notified it was a cash deal, the realtor was advised the transaction could be closed quickly, if that was the case, and the buyer could have possession in a hurry.

The realtor then drew up the offer with a quick closing date. The offer was written up in a strange way as the deposit was the full purchase price and it was supposed to come to the lawyer’s office instead of the realtor’s trust account. The realtor had difficulty obtaining ID from the buyer, though she finally did get a birth certificate from him to copy. He could not and would not produce any photo ID.

When the lawyer drew up the purchase documents, the appointment was rescheduled three times as the buyer would cancel at the last minute. His excuses for cancelling varied from family emergencies to being unable to get off work. The buyer claimed that he is in the military and could not tell the government he needed time off to attend the appointment.

The lawyer informed the buyer that the deadlines were tight for the real estate transaction to go through, and that everyone must take office time to attend appointments on occasion to see their doctor, dentist, lawyer, etc. He was advised the appointment was rescheduled three times and the deal was to close the following day.

At that point, the buyer told the lawyer he would courier a bank draft to her that afternoon to get the deal closed. By this time there were enough flags raised. The lawyer was not prepared to use any monies received in trust from him without having another lawyer as agent to confirm his identification or being able to confirm it herself. He was told this. Since then, the lawyer, realtor and seller have not heard from him.”

COMMENT: this fraudster’s tactic was obviously to let the transaction get so close to the closing date that they hoped the lawyer would accept the undoubtedly fake bank draft. Any rush deal, any situation where the other party is pressuring you to take quick action is fertile ground for fraud. It’s not good to be rushed in any event but if someone is telling you the deal will disappear or you will lose some benefit if you don’t act quickly. DON’T ACT HASTILY! Consult with your lawyer or trusted fellow investor. Never rush it.

Ways To Protect Yourself

Understand and recognize the examples of fraud

If circumstances are strange or too good to be true, run the other way.